A Trump victory in the US will shake up the global economic risk scenario
We have entered a period of intensifying geopolitical rivalries and conflicts. Russia’s war on Ukraine is now in its third year; the Israel-Hamas conflict could still become a regional war; and the deepening Cold War between the US and China may yet turn hot over Taiwan later this decade. If Donald Trump wins the US presidential election in November, the world will be even further destabilized.
And yet, these risks have had only a limited effect on economies and markets so far. Might that soon change? While the Russia-Ukraine war remains as brutal as ever, its global effects are likely to be modest. The risks of direct Nato involvement or the use of tactical nuclear weapons by Russia are lower today than they were at earlier points in the war.
Equally, while the war initially produced a spike in energy, food, fertilizer, and industrial-metal prices, even Europe—the most heavily affected region—has absorbed the shock with only a modest growth slowdown (or a stall in some cases), not the severe recession that many analysts feared. Russian hydrocarbons have been replaced with increased imports from the US and Middle East. The impact on food prices has reduced since Ukraine managed to reopen a Black Sea corridor for its grain exports.
The Israel-Hamas war has also had only a limited regional and global economic impact so far. True, Israel’s GDP contracted sharply in the fourth quarter of 2023 and will likely remain weak as long as the conflict continues. The economic damage to Gaza, obviously, is even more severe; and Egypt’s revenues from the Suez Canal have fallen, owing to Yemeni Houthi attacks on freight moving through the Red Sea.
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